Income

How Your Income And Contributions Affect Your Housing Loan Entitlement

In case you are wondering how much loan amount you are entitled, this article intends to address that.

By now, you should already know that the maximum housing loan amount Pag-IBIG can possibly grant to a member is P 3,000,000 while the smallest amount is only P 100,000. And the corresponding interest rate is actually shown at the Right Panel of this website.

Basically, there are two very important factors that affect the loan amount you will be entitled to:

The amount of your contribution
Your Net Disposable Income

Naturally, if you want to avail of a bigger loan amount, you need to increase your contribution and demonstrate that your Net Income is also large enough to cover the monthly amortizations.

These things are easier to understand with the following Tables.

Loan Entitlement Based On Pag-IBIG Contribution

So looking at the table, if you need, for example, to get a loan amounting to P 2,000,000 your contribution should be P 950 / month. Now PhP 950 /month is easier for most Pag-IBIG Members. Quite frankly, there is no problem in that area.

Special Note to OFWs / POP Members: Since you are contributing in US Dollars, the table essentially means to need to contribute the US Dollar equivalent of that amount in Philippine Peso. As you know, there is a constant swinging of values between these two different currencies so there is also a corresponding adjustment.

Loan Entitlement Based On The Capacity To Pay

Take note of this part and this is very important.

According to the Pag-IBIG Fund Primer on Housing Loan, “A member’s loan entitlement shall be limited to an amount for which the monthly repayment on principal and interest shall not exceed 40% of the member’s net disposable income…”

In other words, the monthly amortization should be less than 40% of your net disposable income.

The following Table should guide you.

For example, if you are looking to get a PhP 1,000,000 loan and plan to pay it in 10 years (monthly amortization is P 12, 398.57 at 8.5% interest per annum), your net disposable income should be PhP 30,996.43 or higher (the higher the better).

So to avoid having problems paying for the property, that means you have to work backwards: Determine your net disposable income first, then buy a property based on the amount of loan that you can comfortably pay.

Let’s see if you really understand the Table shown above.

Question: You are planning to get a Pag-IBIG Housing Loan amounting to P 2,000,000 and pay it in 10 years. How much should your monthly income be?

Answer: Your monthly income should be P 67,467.50 or higher. And your monthly contribution should be P 950.

Additional Notes on Borrower’s Eligibility For Housing Loan

To be eligible for the housing loan, a member should:

Be a member for at least 24 months and has remitted at least 24 monthly contributions.
Be 65 years old or younger at the time of loan application.
Not be more than 70 years old at the maturity date of the loan.
Have no outstanding housing loan from Pag-IBIG.
Have no Multi-Purpose Loan in arrears at the time of housing loan application.
Have no Pag-IBIG Housing Loan that was foreclosed, cancelled, bough back or subjected to dacion en pago.

Related Articles To Check:

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This article on Income, Contributions and Loan Entitlement is written by Carlos Velasco.

5 Great Tips For The First Time Pag-IBIG Home Buyers

by Pag-IBIG Financing Admin

This article is intended for the first-time home buyer who wanted to buy a house using Pag-IBIG Financing.

Maybe you are still single and you already wanted to get a house before getting married. (Well, this was the route that I followed.) Or, maybe you are newly wed and you decided that you want to live separately from your parents. Believe me, there’s no substitute to the feeling that you are living on your own home.

A Pag-IBIG starter home — your first home — may not be the most impressive home in town. That’s okay. Forget about the Joneses. Like your puppy love, don’t ever think that it will become your dream home. Rather, treat it as a nest egg that allows you to slowly build your investment (hedge against inflation) while literally having a roof over your head.

Buying your first home through Pag-IBIG is so easy if you take note of the following tips offered here.

Tip #1: Work With Your Real Estate Professional
By real estate professional, in this context, I’m referring to the real estate broker or agent who is directly selling the house.

House From The Up Movie -- A Nice Starter Home You may think that getting the assistance of a real estate agent will make the property more expensive. Whoever told you that must be very ignorant of the whole process.

Here’s what you should know: The real estate professional can’t change the selling price of the property that is owned by the Developer. That is, they can’t markup the price nor can they offer a discount. The selling price and discounts are completely dictated by the Developer’s Marketing Team and the agent can never, ever change that price.

Using a real estate professional right from the start saves you from a lot of headaches associated with the home purchase. For one, the guy is a good source of information such as the following:

The project
The property
The financing schemes
Special promotions and discounts
The materials used,
The move-in process

And if you are using Pag-IBIG Financing, your real estate agent should be able to help you cut through the bureaucracy in the Office.

Tip #2 : Buy A New House

Avoid foreclosure properties or properties that are for assume. Most of these properties are inherently problematic. You don’t want to find yourself catching someone else’s problem, do you?

Many foreclosed properties are so cheap you are tempted to jump on the deal immediately. Not so fast. This may be one of those cases where cheap could actually turn out to be very expensive due to probable renovations. If renovations are needed, we can point you towards reputable contractors like Art Construction.

As much as possible, make sure you are the first owner. Of course, as time goes, newer homes will become harder to find. If that’s the case, make sure that the Land Title is clean.

Tip #3 : Buy From A Legitimate Real Estate Developer

Never, ever deal with a fly-by-night real estate developer. But the crooks have a way of putting on the mask in such a way that you can’t detect the devil’s intentions. Here’s where common sense becomes a useful tool at your disposal.

At the very least, a legitimate Real Estate Developer:

Has complete Business Permits and Licenses to operate in that line of business.
Issues an Official Receipt from the Bureau of Internal Revenue.

Some good points to keep in mind:

Check the track record of the Developer – especially its past projects.
Make sure they are accredited by the Pag-IBIG Fund. (only if you intend to use Pag-IBIG Loan)
Check the License To Sell and Development Permit – they should have both.

Tip #4 : Make Sure You Have Your Finances In Order

Here’s a handy checklist:

You are currently an active Pag-IBIG member with at least 24 months contributions
Your employment history is impressive
You have enough salary/income to cover the monthly amortization

Tip #5 : Save Enough For The Down Payment

The greatest hurdle most real estates buyer ever faced is coming up with the down payment. Many are surprised when they find they don’t have enough cash to cover the outright cash payment required of them.

The down payment, sometimes called equity, is usually 10% to 30% of the selling price. And almost always, it is to be paid one-time about one month after placing the Reservation Fee. So one of the first problems you should think about is the amount of cash you need to raise for the down payment.

Down Payment Tip: Ask your real estate agent if you can defer the payment of the down payment to, say, 12 months. This should be easier on your pocket.

“5 Great Tips For The First Time Pag-IBIG Home Buyers” is written by Carlos Velasco.

Can You Afford That House?

by Pag-IBIG Financing Admin

“The ending is everything. Plan all the way to it, taking into account all the possible consequences, obstacles, and twists of fortune that might reverse your hard work and give the glory to others…” –Robert Greene, The 48 Laws of Power

This is very much applicable for first–time home buyers.

How much can you afford to spend?

That is the first question that you have to ask yourself. And once you get the answer, you’d most probably realize that you’ll have to borrow money to finance your dream home. This is what we call a mortgage.

For home buyers, taking out a mortgage is a big problem. And why is that? It’s because financial institutions, such as your local bank, might not want to lend you the exact amount that you need. It has a lot to do about the risk involved in lending you the money.

When you get pre-qualified for a mortgage loan, financial institutions are basically looking for answers to the following questions:

Do you make enough money to pay back your loan?
What is your credit rating?
Do you have assets that you can use as collateral?

With these questions, you are related to concepts of Income, Credit Worthiness and Collateral. Let’s tackle each one of these.

Do you make enough money to pay back your loan?

Banks would not only want to know how much money you currently have; they also would want to know how much you would likely be making over the next thirty or so years. They would also want to know your assets and liabilities, current and non–current. Your other properties, like your car and home, are also considered by the banks before they lend you anything.

Generally, banks would require you put 20% equity of the value of your property before they grant your mortgage. But some banks offer special financing arrangements that minimize the equity requirement.

What is your credit rating?

Credit rating is among the most important factors considered by the banks or lending institutions to determine the risk of lending you the money. What happens is they take a look at your financial history, your ability to pay your credit card bills, how much is your income and your expenses. A poor credit rating adversely affects your chance of getting a loan.

Do you have assets that you can use as collateral?

A collateral is simply a form of security usually an asset that you pledge to the lender should you default on your loan. It is a way for banks and financial institutions to shield them against the risks of lending you the money.

Collateral can be in any of the following forms:

Real Estate (home, land, farm, etc)
Cash Accounts
Shares of Stock
Insurance
Future Collectibles

What happens is you are giving them the right to take over the collateral should a loan default happen.

Don’t let this happen to you.

Now that you’ve understood the bank’s point of view, it’s time to look at your point of view.

Your Timeline

How long do you plan to stay in your new home? Make economic sense in your investment by not just buying and then selling it after three or so years of staying in the house. You do know that there are costs of buying and selling the property, which will be a lot if your property does not appreciate in value quickly enough to cover these costs. Weigh the pros and cons of buying and selling so quickly.

Your Comfort Zone

So the bank loaned you Php 8,000,000 to finance your new home, eh? That’s good. But how do you plan to repay this loan? Do you plan to repay this for the rest of your life?

The point here is, know your limits. Can you really afford to loan this amount when you have other obligations? Remember: your house payment is just a piece of your financial puzzle. Ask yourself what you’re ready to sacrifice in order to make that dream house a reality.

So if you’re planning to buy a home, look at the end. Can you afford it? If you see yourself eventually becoming homeless in the streets, then you have to reconsider. Maybe it’s not yet time to take that first step.

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Can You Afford That House is written by Kyro Jo as a guide for first-time home buyers. Kyro considers this to be the first step any home buyer should take when thinking about buying a home.